New Jersey’s state government pension fund, projected to lose billions in revenue to the coronavirus crisis, is planning to defer some pension payments to the next fiscal year.
The state is planning to postpone a September pension payment of $950.9 million to October, the start of the next fiscal year, according to a grim budget report from the state treasury released last week. Its current fiscal year has already been extended to September from June.
New Jersey, expecting a $10 billion shortfall through the end of fiscal year 2021, is looking to cut more than $5 billion in planned spending across nearly all sectors of government. That includes delaying more pension contributions, as well as school aid and municipal property tax relief.
“While there are many moving parts, what is clear is that a decline of this magnitude would be worse than the Great Recession,” state Treasurer Elizabeth Maher Muoio said in the budget report. “This means the sizable surplus and rainy day fund we have built together will easily be depleted.”
Prior to the pandemic, New Jersey had been making strides to improve its economic situation, worsened by its large debt load and pension liabilities. Over the past two years, the state made record payments into its retirement system, and it made its first rainy day fund deposit in over a decade.
However, any surplus in the budget will soon be drained, as the coronavirus compounds the state’s financial problems. Even before the economic fallout, the state had budgeted just 70% of its annual actuarially determined contribution (ADC) for the pension fund. The state pension fund is roughly 40% funded.
New Jersey is also losing tax revenues at a time when health care and unemployment costs are spiking as a result of the public health crisis. The state has reported about 11,200 deaths through this week, roughly one-tenth of the national death toll from the coronavirus.
The state treasurer also noted that more “significant” budget cuts will be needed in fiscal year 2021 to stem the losses if the state is not allowed to borrow or if it does not get additional federal funding.
As it is, Gov. Phil Murphy has been appealing for additional federal aid for state governments over the past month. He argued the state may have to lay off front line workers, such as teachers, police officers, firefighters, emergency medical personnel, and health care employees without it.